• October 24, 2014

October 24, 2014?Information technology and globalization\r\nhave caused an ?unbalanced growth model? with implications for advanced and\r\ndeveloping economies alike, best-selling economist Tyler Cowen told Nathan\r\nemployees. Cowen, a professor at George Mason University, gave his assessment\r\nwhile discussing why ?Average is Over,? also the title of\r\nhis follow-up book to the best-selling Great\r\nStagnation.

\r\n\r\n

The Future of Labor

\r\n\r\n

The uneven income distribution resulting from this model means\r\nyoung workers ?will often receive wages lower than what was the case 10 or 15 years\r\nago.? Top earners everywhere will be highly educated people who use information\r\ntechnology to ?sell to a much larger and more productive global economy.? This\r\nsuggests that those who excel in science and technology will thrive, but Cowen\r\nalso thinks that skilled marketers and communicators will be in high demand.\r\nBusinesses, for example, may face a scarcity of the intellectual and managerial\r\ntalent necessary to act on abundant opportunity.

\r\n\r\n

Premature\r\nDeindustrialization

\r\n\r\n

From a development perspective, manufacturing can?t be\r\nexpected to contribute to growth in Myanmar the way it did in South Korea, or\r\nfor that matter, the United States and Western Europe, where manufacturing once provided\r\nmore than 30 percent of employment. ?I don?t think any country today can\r\nretrace that path,? he said. ?So growth will look very different. I don?t think\r\nwe?ve internalized that.?

\r\n\r\n

In developing countries, for example, the top 20 percent of earners\r\nwill be well off and include millionaires, with most of the remaining earners\r\nin service jobs. That service-sector majority will be much better off than\r\nbefore, with gadgets, health care, and access to education, but not as well off\r\nas people were during industrialization. In fact, Cowen agrees with development\r\nand globalization economist Dani Rodrik that ?a lot of the world is seeing a\r\npremature deindustrialization,? which Cowen attributes to the speed of automation.\r\n

\r\n\r\n

Cowen, also a contributor to newspapers and magazines as\r\nwell as being a blogger and food writer, spoke at Nathan?s Arlington, Virginia,\r\nheadquarters as the first guest in the firm?s ?Economists Present? series. The\r\nseries aims to stimulate creative thinking and appreciation for the economist?s\r\nrole in society. An hour-long question-and-answer session with Nathan?s economists\r\nand development experts embraced the range of the firm?s interests and\r\nactivities, including infrastructure, policy, taxes and regulation, trade, and\r\nglobal economic trends.

\r\n\r\n

China, India

\r\n\r\n

China was a key concern. Cowen said China is headed for\r\neconomic collapse in the next two years, harming other countries, but will\r\nrebound and grow at a more reasonable pace of about 3 percent to 4 percent a\r\nyear. He is ?most positive? on India?not necessarily because of the new\r\nadministration of Prime Minister Narendra Modi, but rather because India is insulated\r\nfrom the faltering Chinese and European Union economies and energy prices are\r\nlow. Catch-up growth and competition among states drive the economy internally.

\r\n\r\n

?Big chunks of the world are going\r\nto see a slowdown pretty soon,? he said. ?India, no.?

\r\n\r\n

India is debating how to promote manufacturing to provide\r\njobs for a burgeoning population. Cowen said India should focus first on\r\nimproving infrastructure and overhauling the farm sector. States can be the\r\ntesting ground for manufacturing policy, with some states having no policy. ?Let?s\r\nsee how it goes,? he said.

\r\n\r\n

?Politicized? U.S.\r\nAid

\r\n\r\n

As for U.S. aid policy, Cowen said the government is not\r\ndoing much to improve the quality of aid even though real data on what works\r\nare becoming available. To the contrary, he predicted that U.S. foreign aid would\r\nbecome ?more politicized? and the quality decline. Overhauling immigration\r\npolicy, with no budget cost, would improve development by attracting skilled\r\nworkers to the United States. Those same workers would pass those skills back\r\nto their home countries and form joint ventures. Allowing greater foreign\r\ncompetition with U.S. farm products would help, but that won?t happen, he said.

\r\n\r\n

Nor is a serious overhaul of tax policy likely. Cowen said\r\nthat the United States needs to lower the corporate rates to OECD averages even\r\nif that means increasing tax rates on high earners. Republicans would cut the\r\ntop rate for top earners too low, a policy mistake, while Democrats wouldn?t act\r\nat all.

\r\n\r\n

Dani Rodrik, of Princeton University, is scheduled to speak\r\nin November.

Recent News

Return to news